At its simplest, OTT is the transmission of video programming directly to television sets and mobile devices (such as smartphones and tablets) using a broadband connection. The technology earned its appellation by going to viewers over and around the traditional closedvideo-distribution platforms built by wired cable operators like Comcast and Time Warner, satellites like DIRECTV, and telcos like AT&T U-verse (collectively known as multichannel video program distributors, or MVPDs).

While the most ardent proponents of OTT would like to bypass the traditional MVPD gatekeepers and use broadband to deliver any and all video programming directly to viewers, at least over the short term, it is unique, original and exclusive content that drives traffic and growth.

The rise of OTT can be tracked by the increasing importance of broadband subscriptions and the steady increase in connection speeds (now often in excess of 25 megabits per second, more than enough for multiple HDTV feeds) as well as the popularity of home networks and Wi-Fihotspots.

The Federal Communications Commission’s May 2011 report on broadband places U.S. penetration of broadband at 63 percent, though that number is likely higher now, given the rapid adoption of smartphones and tablets with 4G and LTE connections. The majority of fixed broadband subscribers are served by the cable industry.

Average weekly media time per person (hours: minutes)

Still, there has been no erosion in traditional TV consumption, despite the emergence of Netflix, YouTube and Hulu. In its Television Audience Report 2010–2011, Nielsen reported that total weekly TV viewing per TV household had increased by more than an hour between 2010 and 2011, growing from 58 hours and 28 minutes per week to 59 hours and 28 minutes per week.

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While content in the living room has traditionally been viewed on different screens and delivered in different forms of media, recently things have changed significantly. The past couple of years have seen a large-scale disruption of the entire TV landscape and its delivery models.

The late ’90s and early 2000s saw the Internet and home networks start to proliferate, and there was talk of a new era, a “digital living room.” Much of it was met with skepticism — and with good reason. The slowness of early Wi-Fi networks, the lack of software standards and clunky initial product offerings from both hardware and service manufacturers more often than not resulted in consumer disappointment.

Over time, however, fundamental technology building blocks matured. Wireless networks became fast enough to handle video streaming. Software protocols such as DLNA and Bonjour began to ease the use of these technologies, while pioneers such as Microsoft (Xbox Live), Netflix and Apple (iOS devices) began to make products that would change consumer-usage behaviors.

As consumers began to look at new ways to shift media over networks in and outside the home over the past decade, slowly but surely distribution models for content began to adapt, eventually upending the content creation and distribution value chain. Physical distributors of content, be they music or video retail and rental, started to get hit hard as more content shifted to online distribution. Content creators saw their distribution windows collapse, and new forms of distribution enabled content creators to begin to sidestep the large studio decision makers. Aggregator players like Netflix and Hulu ascended, showing consumers entirely new ways to bundle and buy content.

All of this has added up to a vastly shifted entertainment business today, which has been reshaped in many ways to fit the new reality of the digital living room. That said, the way forward is going to see just as much, if not more, rapid change. The adoption of tablets, social media, new interfaces, and the changing nature of the TV itself mean the digital living room will continue on its disruptive path.

The goal of this report is to help readers understand the different technologies driving this shift. We asked analysts to identify key trends reshaping their market, to identify the key players driving this change, and to look down the road a bit and help us understand how the market sector will look. In the following pages:

• Mari Silbey breaks down how the set-top box and pay-TV providers will evolve in the age of over the top.
• Consumer tech expert Alfred Poor breaks down how new interfaces, from touchscreens on tablets and phones to the rapidly changing nature of the on-screen interface and user guides, will impact consumer behavior and media models in the future.
• Longtime media analyst Larry Gerbrandt breaks down how the shift toward over-the-top video distribution is impacting the economics of media.
• Patrick Moorhead looks at how different smart TV and app platforms are taking shape.

So enjoy, and learn. Also, let us know, in comments or email, what trends matter most, how you think the digital living room will change, and who will ultimately be counted among the winners.

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